Exclusive: Adamas Fund II to close on $280m

The China-focused lender is set to surpass the $275 million hard-cap on its second fund.

Hong Kong-headquartered Adamas Asset Management plans to hold a final close of $280 million on its Greater China Credit Fund, chief executive and managing partner Paul Heffner, told PDI.

Adamas Asset Management Fund II has amassed commitments from investors in Europe, the US, Asia and the Middle East, primarily pension funds, private banks and family offices, Heffner said.

Documents should be ready by April with closing targeted for May, subject to customisation as a result of commitments from its Middle Eastern investors.

With an original target of $200 million, Fund II is set to surpass its hard-cap of $275 million. The fund sealed its first close of $79 million in 2013.

“We’re thrilled with the support that we’re seeing right now based on the cash distribution that we’ve generated,” Heffner commented.

Fund II made a 15.6 percent cash distribution to its investors in 2014. The cash raised at first close has been fully invested and the fund is now recycling principal. Over the next 12 months, it will draw down the additional capital, Heffner said. At present the firm has about 20 deals in the pipeline.

Adamas invests in collateralised loans which mature in 12 months or less with the an average size of $10 million to $15 million. The loan-to-value is typically less than 50 percent and averages around 30 to 40 percent.

The fund is sector agnostic and invests in small- and medium-sized businesses, both onshore and offshore, in China, Hong Kong, Macau and Taiwan. Adamas offers financing to a sector of the economy which is experiencing rising costs of capital, as domestic banks reign in lending and the IPO market dries up. Heffner said that he is seeing more Hong Kong deals and a significant number of corporate restructurings and reverse takeovers.

To date, Adamas has invested in 55 onshore SMEs, five of which have defaulted and been pursued by the firm in the Chinese courts through the enforcement process. Adamas has won all these cases and fully recovered their loans.

The safeguards the firm employs when lending include investing in jurisdictions with strong legal systems, specifically including the option to hold official company documents, known as ‘the chops’, in escrow. The structure of its platform also allows Adamas to do onshore and cross-border transactions while its local presence, with more than 40 people evenly split between offices in Hong Kong and Shanghai, are also key to the firm’s success, Heffner explained.

Fund II is closed-ended with a five-year investment period, three-year holding period and divestment period of two years. The firm’s previous vehicle closed on $100 million in 2010 and was structured as an open-ended vehicle.

On final close, the Greater China Credit Fund II will bring assets under management at Adamas to $900 million, Heffner said.

Adamas provides structured funding for growth enterprises and manages US dollar, renminbi and Japanese yen funds for institutional investors, family offices and shareholders of Adamas Finance Asia, a company listed on the AIM market of the London Stock Exchange.